It Appears as if MBIA and Ambac Plan on Stiffing the Banks
June 16, 2008 – 6:43 amMBIA is now reconsidering sending the funds received from their last round of fund raising to the insurance subsidiary. The funds are currently held at the holding company level. According to the WSJ, they are scheming on capitalizing a fresh entity to write AAA public finance wraps.
Okay…… so what about the structured product business, which demanded the bulk of the capital in the first place. Oh yeah, those customers get stuck holding the $119B bag, just as I told you those many months ago.
Expect whatever entity holding that noxious trash to get downgraded to junk - even the parent company won’t show it any love. The banks are going to have to cut those marks a lot deeper than they already have.
It’s amazing that this stuff was all over the news a quarter or two ago, hailed by the media as Armageddon, and now that it is finally arrived, you can barely find details on it. Well, here’s a not-tip. The situation has gotten no better from last year, and actually it has gotten much worse.
For those of you who are planning to buy those financials on the dip…. Peace be with you, my friends.
<>
3 Responses to “It Appears as if MBIA and Ambac Plan on Stiffing the Banks”
This is really funny.
What a bunch of arrogant nincomcoops !
Ambac To Terminate Contract With Fitch
In other news, Bloomberg is reporting Ambac Financial to Terminate Fitch Ratings Contract.
Ambac Financial Group Inc., the second-largest bond insurer, is terminating its ratings contract with Fitch Ratings.
“Our decision to refocus and realign our business around our core expertise in the public finance and infrastructure sectors has led us to re-evaluate our ratings needs,” New York- based Ambac said today in a statement. “As part of this review, we have asked Fitch to remove its ratings on Ambac and all its subsidiaries effective immediately.”
Ambac’s request follows one by rival MBIA Inc., which in March asked Fitch to stop providing a financial strength rating on its insurance unit. Bond insurers lost their top ratings after straying from backing municipal bonds, which rarely default, to guaranteeing securities such as collateralized debt obligations, which package pools of securities, including those backed by subprime mortgages, and slice them into pieces of varying risk.
The Point Is Moot
Since Ambac’s guarantee is worthless, there is not going to be much if any new business for Fitch to rate. And as for getting back to “core expertise” (assuming Ambac has any which I highly doubt), I have to ask: What good is expertise when your business model is dead and you have no customers?
One final point: The equity markets have finally realized that Ambac and MBIA have a date with Zero but the ramifications of the inevitable downgrade of hundreds of municipal bond issues has certainly not been felt …. yet.
Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List
Posted by Michael Shedlock at 2:33 PM Two M
By Marc Authier on Jun 18, 2008
MARGIN CALL !
MBIA Says It May Be Forced to Make $7.4 Billion in Payments
By Christine Richard
June 21 (Bloomberg) — MBIA Inc.’s five-level downgrade by Moody’s Investors Service probably will force it to make $7.4 billion of payments and collateral postings.
MBIA has $15.2 billion of assets available to satisfy the requirements, the company said yesterday in a statement. That includes $4 billion in cash and short-term investments, $1 billion of unpledged collateral and $10.2 billion of other securities, MBIA said.
The company issued the statement in response to questions it received after Moody’s yesterday reduced MBIA’s insurance financial strength rating to A2 from Aaa. The company’s stock dropped 13 percent yesterday after the downgrade on concern that the Armonk, New York-based company would be forced to pledge assets.
By Marc Authier on Jun 21, 2008
Here is another bond insurer downgraded on a sunday !
Sunday evening downgrade. Nice !
Fgic’s Rtg To B1; Outlook-Neg
New York, June 20, 2008 — Moody’s Investors Service has downgraded to B1, from Baa3, the insurance financial strength (IFS) ratings of the main operating subsidiaries of FGIC Corporation, including Financial Guaranty Insurance Company and FGIC UK Limited (collectively “FGIC”).
In the same rating action, Moody’s has also downgraded the senior debt ratings of the holding company, FGIC Corporation to Caa2 from B3 and the contingent capital securities ratings of Grand Central Capital Trusts I-IV to B3 from B2. Today’s rating action concludes a review for possible downgrade that was initiated on March 31, 2008, and reflects the company’s severely impaired financial flexibility and the company’s proximity to minimum regulatory capital requirements relative to our estimations of expected case losses.
By Marc Authier on Jun 23, 2008